The suspicions raised by some increasingly frequent (and frantic) voicemails left by Yelp ad salespeople for local businesses were borne out this week, when the crowdsourced ratings site announced first-quarter earnings that led to a far lower forecast for this year's revenue.
According to Bloomberg, "a wave of advertisers stopped spending with the online review guide in the first quarter," which caused analysts to fear for the company's long-term sustainability.
The company, which has long faced allegations of manipulation of reviews and aggressive if not outright shady sales tactics, has lost money even in quarters where revenue was good. But as of January, Yelp COO Jed Nachman said in an analyst call late Tuesday, ad buyers who'd been with the site for about a year started dropping off, in part because Yelp "started shifting the way it charged for ads," Bloomberg reports.
"The company began addressing the issue and was able to “course-correct” and saw better results in March and particularly in April," Bloomberg reports, which is about the same time missed calls from numbers associated with Yelp started mounting at the business I own, up from one or two a week to as many as four a day. (God bless Google Voice's "spam" function.) Other business owners I know reported the same phenomenon, with one local restauranteur who asked to remain anonymous saying that he's stopped picking up the phone during certain hours as "I know it'll be Yelp and I'm scared to piss them off."
MKM Partners analyst Rob Sanderson expressed skepticism at Yelp's assertion that they'd turned things around by March, saying "In a high-churn business, investors should rightfully ask that if retention issues were so easy to remedy in one to two months, then why was this not done at any time in the five years since IPO.”
After the company said late Tuesday that it had lowered its yearlong expectations from $880-$900 million to $865-$850 million, its stock dropped by 28 percent, Business Insider reports. Net revenue for the first quarter of 2017 was "$197.3 million, missing analyst estimates of $198.4 million," which actually doesn't sound that terrible. You can read their full Q1 earnings report here.
RBC Capital Markets analyst Mark Mahaney seems dubious about the company's prospects, saying in a note that “There are now substantial questions about Yelp’s salesforce execution and its current value proposition for advertisers."
"Fundamentals are deteriorating,” he said. “This won’t be a quick fix.”